Trust Fund Recovery Penalty (TFRP)
A personal liability for unpaid withheld taxes. It reaches individuals for a business's debt, at the full amount of the trust fund tax.
Full Definition
The Trust Fund Recovery Penalty is the mechanism by which unpaid withheld taxes stop being only the business's problem.
The IRS states it in one sentence: if you are a person responsible for withholding, accounting for, or depositing or paying specified taxes including NRA withholding and employment taxes, and WILLFULLY fail to do so, "you can be held personally liable for a penalty equal to the full amount of the unpaid trust fund tax, plus interest".
Two definitions do the work.
Responsible person. The IRS states this "can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business", and that "a trustee or agent with authority over the funds of the business can also be held responsible". It is about authority over funds, not about job title.
Willfully. The IRS defines it as "voluntarily, consciously, and intentionally", and gives one example that is more expansive than most people expect: "You are acting willfully if you pay other expenses of the business instead of the withholding taxes."
That example is the whole exposure. Keeping a struggling business running by paying suppliers first is, on the IRS's published definition, the conduct described.
This page describes what the rule says. Whether it applies to any particular person is an IRS determination made on facts this page does not have, and nothing here should be read as an assessment either way.
What to do next
If a business has unpaid employment tax and you have any authority over which bills get paid, this is a rule to get advice on rather than to assess yourself against. It is also one of the liabilities the IRS states innocent spouse relief does NOT cover.
What this page does not say
- The IRS page linked here is a summary. The procedure — how the IRS proposes the penalty, the Letter 1153 route, the interview on Form 4180, and the appeal window — is in Employment taxes and the Trust Fund Recovery Penalty and in the IRM, neither of which has been retrieved. None of it is described here.
Sources
- Trust Fund Recovery Penalty — Internal Revenue Service, retrieved 2026-08-21
- Failure to Deposit Penalty — Internal Revenue Service, retrieved 2026-08-21
Last reviewed 2026-08-21 by Tax Resolution Clarity editorial.
Sourced to primary IRS materials and editorially reviewed. Not reviewed by a tax professional. Not tax advice.
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Where to go next
The IRS publishes the rules this page describes. Your own notice governs your dates.